© Reuters. FILE PHOTO: A plant decorates the sales space of Australian petroleum exploration and manufacturing firm Woodside Vitality throughout the LNG 2023 power commerce present in Vancouver, British Columbia, Canada, July 13, 2023. REUTERS/Chris Helgren/File Photograph
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(Corrects measurement of Barossa fuel undertaking to $4.3 bln from $3.2 bln within the penultimate paragraph)
By Scott Murdoch and Lewis Jackson
SYDNEY (Reuters) -Australia’s Woodside (OTC:) Vitality and rival Santos are unlikely to announce any settlement on a proposed A$80 billion ($52 billion) tie-up to create a world oil and fuel large till a minimum of February, mentioned an individual with direct information of the talks.
Woodside and Santos final week confirmed hypothesis they have been in preliminary discussions to create a joint entity that will have belongings stretching from Australia to Alaska, the Gulf of Mexico, Papua New Guinea, Senegal and Trinidad and Tobago.
Bankers are at the moment getting knowledge and particulars on each firms, and work on a possible deal has solely simply began, the individual mentioned on situation of anonymity as a result of the talks are non-public.
There isn’t a mounted due diligence interval or timetable in the intervening time, the individual added.
Many Australians take holidays in December and January, the height of the southern hemisphere summer time, making it more durable to finish transactions throughout the interval.
Santos is being suggested on the deal by Citigroup and Goldman Sachs, whereas Morgan Stanley is advising Woodside, sources confirmed.
Santos and Goldman Sachs declined to remark, whereas Woodside and the opposite banks didn’t instantly reply to requests for remark.
A second individual with direct information of the talks mentioned solely about 5% of the progress wanted has been made up to now, and Woodside has been driving the talks between each firms.
Woodside’s first strategy to Santos was made shortly after Santos’ investor day on Nov. 22, the primary individual mentioned.
Perth-based Woodside, the bigger of the 2 firms, has mentioned the talks with Adelaide-based Santos have been confidential and there was no certainty an settlement would materialise. Its market capitalisation stands at A$56.91 billion, whereas Santos is valued at A$22.1 billion.
In an end-of-year video message to workers on Wednesday, Santos CEO Kevin Gallagher mentioned Woodside had approached his firm “a number of times” over the previous yr or so a few deal, in line with an organization supply who confirmed feedback first reported by the Australian Monetary Overview.
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The proposed tie-up comes amid a wave of consolidation within the international power sector, which has seen oil majors Exxon Mobil Corp (NYSE:) and Chevron (NYSE:) paying greater than $50 billion every to amass two U.S. producers.
Santos and its advisers have began reaching out to shareholders to get their perspective on a possible deal.
“We’ve been speaking to bucketloads of investment bankers,” mentioned Matthew Haupt, a portfolio supervisor at long-time Santos shareholder Wilson Asset Administration.
“They’re all trying to work out a successful price for Santos, the least Woodside can pay that will still make Santos shareholders happy.”
Macquarie analysts mentioned on Thursday that Woodside would want to supply between A$8.70 to A$9 per share for Santos primarily based on synergies unlocked from the merger. The longer it took Woodside to persuade its shareholders of the deal’s deserves, the higher the chance it will fail, as occurred throughout its 2015 bid for Oil Search (OTC:), they added.
Santos shares have been buying and selling 3% larger at A$7.53 on Thursday afternoon.
Discussions with Santos come lower than 18 months after Woodside acquired BHP Group (NYSE:)’s oil and fuel enterprise, and because it grapples to get remaining approvals for its A$16.5 billion Scarborough liquefied (LNG) enterprise in Western Australia, its greatest progress undertaking.
The proposed all-stock Santos deal would give Woodside the benefit of much more appreciable scale, each folks mentioned, including it was very laborious for the corporate to seek out an applicable acquisition goal elsewhere on this planet given the trade consolidation already underway.
Santos, in the meantime, is combating a authorized problem in opposition to its flagship Barossa fuel undertaking that has stalled the $4.3 billion funding for over a yr and rattled buyers. The corporate has additionally flagged hovering capital spending.
A mixed Woodside-Santos can be anticipated to have entry to cheaper funding and extra publicity to worldwide buyers.
